In Greenshoots’ current predicament, turmoil would appear to an understatement.
The natural and specialty DSD distributor, which had just a few months earlier completed a multi-million-dollar capital raise, is now faced with swelling bills, irate suppliers and a full-scale retreat from several distribution territories.
With several high-profile, trendy beverage companies on its roster, including BluePrint, GT’s Kombucha, Mamma Chia and Tumeric Alive, Greenshoots won supplier accounts with the promise of the application of DSD frequency and care to influential stores in channels that are used to setting their shelves themselves. But its core promise, better sets and service in natural and specialty retail for new and emerging brands, has frequently been offset by complaints about inconsistent execution.
Over the past two days, BevNET spoke with executives from several beverage brands affiliated with Greenshoots, each of whom stated that the distributor has in recent weeks been delinquent and unresponsive regarding tens of thousands of dollars in unpaid bills. Some pointed the blame at Greenshoots’ rapid expansion and decision to take on huge retail accounts, including Safeway and Kroger, as the reason for its current troubles.
Brennan Corbin, Greenshoots’ co-director of business development, concurred.
“We grew too quickly as a company,” he told BevNET.
As a result, Greenshoots is now in the process of consolidating its distribution territory, and will focus its attention on California, which is its primary market. Corbin confirmed that Greenshoots has ended operations in the North Atlantic (“We were never profitable in that region,” he said) with specialty distributor Gourmet Guru acquiring the company’s distribution rights for the region. Greenshoots has also pulled out of Washington D.C. and Texas; Corbin expects that national wholesalers UNFI and KeHe will assume distribution for those markets. He expects a full transition to be complete by Nov. 22.
As for Colorado, Corbin was uncertain as to whether Greenshoots would continue distributing in the state, but that as of now, there have been no announced plans regarding its status.
“Even though we’re consolidating, it’ll make our organization stronger,” Corbin said. “I want to take care of not only our brand partners, but our retail partners to make sure that if we are transitioning out of these regions that we do it the most seamlessly possible way. We’re going to be working with these companies and retail partners in California, so we need that relationship strong.”
However, Greenshoots’ affiliation with Kroger appears to have been significantly weakened. The distributor had played a major role in Kroger’s much-heralded “Taste of Tomorrow” program, which promotes a set of emerging, on-trend beverage brands, including Aloe Gloe, Just Chill and Chia\Vie. As some of Greenshoots’ brands like Blueprint had been added to the program, the company had been tapped as the distributor for 55 Fred Meyer stores (which come under the Kroger umbrella) in the Pacific Northwest, but was unable to adequately manage the portfolio of products.
“After six months, we evaluated it, and it just wasn’t working; we were losing a lot of money from it,” Corbin said, noting that DPI, a specialty distributor, now has the contract for the Taste of Tomorrow set. (Kroger officials would not comment on the transfer).
While Corbin will be involved for mapping a strategy to address its revised distribution plans, it falls on Greenshoots CEO Ben Lewis and the company’s investors, including Pergament LOHAS Fund (which was the primary investor in its most recent capital infusion) to find the funds to pay for its outstanding debts. Nat Noone, the company’s original founder and CEO, left in the spring following the investment from Pergament. Lewis, who had started philanthropic brand GIVE Water as a college student, had come to the company in a leadership position in 2011, following his own investment in Greenshoots.
Corbin described Lewis as “working feverishly” to figure out a plan to pay suppliers.
“That’s the number one point on the agenda: to make sure that’s taken care of,” Corbin said. “It’s not right, and we all know that. It’s hard for [co- director of business development] Jeremy [Cohen] and I, because we’re the ones fostering the relationships with these brands. Having to take those phone calls or e-mails is really emotionally challenging.”
Greenshoots’ problems have already cost the company one significant brand partner: Health-Ade. The fast-growing kombucha company terminated its partnership with Greenshoots approximately 1-2 weeks ago, according to Health-Ade co-founder Justin Trout, who praised the early days of its relationship, but pointed to the distributor’s inability to provide consistent service as the reason for its decision.
“They were a fantastic service helping us outside of retail reset schedules and were able to get us into Whole Foods,” Trout said. “But we couldn’t hang with them. We were growing faster than their service model. They sell off the truck; that can be debilitating in that you can sell all of your stock on one part of your route and have nothing left for the rest of it.”
Like Trout, Chris Campbell, the CEO of Chameleon Cold-Brew, was pleased at the outset of his brand’s partnership with Greenshoots, but stated that the distributor is “not a true DSD and would cherry-pick accounts.”
“As we became a national brand, that became a challenge, and it became more important to work with [national wholesalers] UNFI and KeHE,” Campbell said. “When they started working with Safeway and Kroger, it was a fundamental shift in planning. They didn’t do the proper analysis and didn’t execute. It ate them alive.”
BevNET Editor-in-Chief Jeff Klineman contributed to this story.